Pomal Kanji Govindji vs Vrajlal Karsandas Purohit

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1988 Supreme(SC) 695

SUPREME COURT OF INDIA
SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.
Pomal Kanji Govindji and others etc., Appellants
Versus
Vrajlal Karsandas Purohit and others etc., Respondents.
Civil Appeals Nos. 9993 of 1983, 397 of 1980, S.L.P. (Civil) No. 8219 of 1980 and Civil Appeal No. 1286 of 1981
Decided on11-4-1988.
Advocates appeared
Mr. B. K. Mehta, Mr. Rajinder Sachhar, Mr. T. U. Mehta and Mr. S. K. Dholakia, Sr. Advocates, Mr. Vimal Dave, Mr. Krishan Kumar, Mrs. C. M. Chopra, Mr. P. H. Parekh, Ms. Sunita Sharma, Mrs. Rani Chhabra, Mr. R. C. Bhatia and Mr. P. C. Kapur, Advs. with them, for Appearing Parties.

Advocates:
B.K.MEHTA, C.M.CHOPRA, KRISHAN KUMAR GOGNA, P.C.KAPUR, P.H.Parekh, R.C.BHATIA, RAJINDER SACHAR, RANI CHHABRA, S.K.DHOLAKIA, SUNITA SHARMA, T.U.Mehta, VIMAL DAVE

Headnote:T. P. Act, Sec. 60-The rule against clog on the equity of red emption is that, a mortagage shall always be redeemable and a mortgagor's right to redeem shall neither be taken away nor be limited by any contract between the parties-The rule empowers the court to relieve a party from his bargain if he has agreed to forfeit wholly his right to redeem in certain circumstances, such agreement will be avoided - Courts have relieved mortgagors from two bargain whereby right to redeem is not taken away but restricted-The doctrine “clog on the equity of red emption” is a rule of justice, equity and good conscience and must be adopted in each case to the reality of the situation and the individuality of the transaction- Court must lake not, of the time, the condition, the price aspiral, the term bargain and the other obligations in the background of the financial conditions of the parties-Freedom of contract is permissible provided it does not had to taking advantage of the oppressed or depressed people-The law must transform itself to the social awareness- Poverty should not be unduly permitted to curtail one's right to borrow money on the ground of justice, equity and good conscience on just terms-If it does, it is bad since we live in changed time-Whether the mortgage transaction amounted to clog on equity of redemption is a mixed question of law and fact and has to be decided in each case-Courts do not look with favour any clause or stipulation which clogs equity of redemption-A clog on the equity of redemption is unjust and unequitable – It is a right of the mortgagor on redemption, by reason of the very nature of the mortgage, to back the subject of the mortgage and to hold and enjoy as he was entitled to hold and enjoy it before the mortgage-If he is prevented form doing so or is prevented from redeeming the mortgage, such prevention is bad in law-If he is so prevented, the equity of redemption is affected by that whether opting or not, and it has always been termed as a clog-Such clog is unequitable and the law does not contenance it-Long term for redemption by itself is not a clog on equity of redemption-whether or not in a particular transaction there is a clog on the equity of redemption, depends primarily upon the period of redemption, the circumstances under which the mortgage was created, the economic and financial position of the mortgagor, and his relationship vis-a-vis him and the mortgagee, the economic and social conditions in a particular country at a particular point of time, custom, if any, provelent in the community or the Society in which the transaction tabs place, and the totality of the circumstances of the parties, the time, the situation, the clauses for redemption either for payment of interest or any other sum, the obligations of the mortgagee to construct or repair or maintain the mortgaged property in cases of usufructary mortgage to manage as a prudent management, these factors must be co-related to each other and viewed in a comprehensive conspectus in the background of the facts and circumstances of each case, to determine whether these are clog on equity of redemption-Mortgage is a security of loan-It is axiomatic principle of life and law that necessituous men are not free men-A mortgage is a conveyance in hand or one assignment of chattels as a security for the payment of debt or for discharge of some other obligation for which it is given-The security must be redeemable on the payment or discharge of such debt or obligation-A provision to the contrary, notwithstanding, is a clog or fetter on the equity of redemption and, hence, bad and void-"Once a mortgage must always remain a mortgage", and must not be transformed into a conveyance or deprivation of the right over the property-Though, long-term by itself as the period for redemption, is not necessarily a clog on equity but in the changing circumstance of inflation and phenomenal increase in the prices of real estate, in this age of population explosion and consciousness and need for habitat, long-term, very long term, taken with other relevant factors, equity of redemption –Keeping in view the financial and economic conditions of the mortgagor, the clause obliging the payment of interest even in case of usutructuary mortgage not periodically but at the time of ultimate reduction imposing a burden on the mortgagor to redeem, the clause permitting construction and reconstruction imposing a burden an the mortgagor to redeem, the clauses permitting construction and reconstruction of the building in this inflationary age and debting the mortgagor with an obligation to pay for the same as a ground for redemption, would amount to clog on equity-A mortgage cannot be made altogether irredeemable or redemption made illusory-The law must respond and be responsive to the felt and disernible compulsions of circumstances that would be equitable, fair and just and unless there is anything to that contrary in the statute, law must take cognizance of that fact and act accordingly -In the context of fast changing circumstance and economic stability, long-term for redemption makes a mortgage an illusory mortgage though not decisive-It should prima facie he an indication as to how clog on equity of redemption should be judged - In the inflationary world, long-term for redemption would prima facie raise a presumption of clog on the equity of redemption (Paras 1, 16, 17, 19, 21, 23, 25, 26, 27, 28, 29 & 31)
T P. Act, Sec. 76(a) - Bihar Building (Lease, Rent & Eviction) Control Act 1982, Sec. 11 -If the wards of tile mortgage deed clearly and in dubitably express an intention to allow expressly certain of a tenancy beyond the term of the mortgage, then only the lease created In the exercise of the power expessly conferred by the mortgage deed would be binding on the mortgagor in respect of urban property-If the words of the mortgage deed do not clearly and indubitably disclose the intention is allow expressly the creation of a tenancy, beyond the terms of the mortgage, the mere fact that the mortgage deed authorises the mortgagee with possession to induct a tenant would not create a tenancy binding on the mortgage after the redemption of the mortgage-In such a case a tenant inducted on the property by a mortgagee with possession when the tenancy of the tenant is not binding on the mortgagor after the red emption of the mortgage, is not protected undo the provisions of the Rent Control Acts of Rent Restriction Acts-Creation of tenancy beyond the red emption of the mortgagee to be binding on the mortgagor is not a prudent management -Where the mortgage dead stipulates that the property should be redelivered to the mortgagor by the mortgagee on redemption clearly indicates that the mortgage deed did not expressly permit creation of tenancy to be binding on the mortgagor after redemption. (Paras 41, 45 & 48)

JUDGMENT

SABYASACHI MUKHARJI J.:— These appeals and the special leave petition are directed against the decision of the High Court of Gujarat, upholding the right of the mortgagors to redeem the properties before the period stipulated in the deeds, as well as the right of the mortgagors to recover possession of the properties from the tenants and/or the mortgagees without resort to the relevant Rent Restriction Act. All these matters were separately canvassed before us as these involved varying facts, yet the fundamental common question is, whether long term mortgages in the present inflationary market in fast moving conditions are clogs on equity of redemption and as such the mortgages are redeemable at the mortgagors instance before the stipulated period and whether the tenants who have been inducted by the mortgagees can be evicted on the termination of the mortgage or do these tenants enjoy protection under the relevant Rent Restriction Acts. One basic fact that was emphasised in all these cases was that all these involve urban immovable properties. In those circumstances, whether the mortgages operate as clogs on equity of redemption is a mixed question of law and facts. It is necessary to have a conspectus of the facts involved in each of the cases herein. We may start with the facts relating to Special Leave Petition (Civil) No. 8219 of 1982 because that is a typical case.

2. In this matter by our order dated 9th January, 1988 we had directed that this special leave petition should be heard first in these series of matters. We do so accordingly. We grant leave and dispose of the appeal by the judgment herein along with other appeals.

3. This is an appeal from the judgment and order of the Gujarat High Court, dated 26th April, 1982 dismissing the second appeal. The High Court observed that the learned Judge had followed the judgment of the said High Court in Khatubai Nathu Sumra v. Rajgo Mulji Nanji, AIR 1979 Guj 171, where the learned single Judge in the background of a mortgage, where the mortgagor was financially hard-pressed and the mortgage was for 99 years and the terms gave the mortgagee the right to demolish existing structure and construct new one and the expenses of such to be reimbursed by mortgagor at the time of redemption, it was held that the terms were unreasonble, unconscionable and not binding. In order, however, to appreciate the contentions urged therein, it will be necessary to refer to the decision of the first appellate Court, in the instant case before us. By the judgment, the Assistant Judge, Kutch at Bhuj in Gujarat disposed of two appeals. These appeals arose from the judgment and decree passed by the Civil Judge, Bhuj, in Regular Civil Suit No. 35/72 by which the decree for redemption of mortgage was passed and the tenants inducted by the mortgagees were also directed to deliver up possession to the mortgagors. The plaintiffs had filed a suit alleging that the deceased Karsandas Haridas Purohit was their father and he died in the year 1956, he had mortgaged the suit property to Kansara Soni Shivji Jetha and Lalji Jetha for 30,000 Koris by a registered mortgage deed dated 20th April, 1943. The mortgage deed was executed in favour of Soni Govindji Narayanji who was the power of attorney holder and manager of the defendants Nos. I and 2. The defendant No. 3 is the heir of said Govindji Narayanji and he was also managing the properties of the defendants Nos. 1 and 2. The mortgage property consisted of two delis in which there were residential houses, shops etc. The mortgagees had inducted tenants in the suit property and they were defendants Nos. 4 to 9 in the original suit. When the mortgage transaction took place, the economic condition of the father of the plaintiffs was weak, he was heavily indebted to other persons. It was alleged and it was so held by the learned Judge and upheld by the Appellate Judge that the mortgagees took advantage of that situation and took mortgage deed from him on hars

Click Here to Read the rest of this document

1988 Supreme(SC) 695

Cases Referred (13)